UPDATE 1-China's Telestone Q2 profit falls, shares slump

* Q2 EPS $0.16 vs $0.19 yr-ago

* Backs 2010 outlook

* Shares fall 20 percent after market

Aug 12 (Reuters) - China's Telestone Technologies Corp's TSTC.O second-quarter profit fell 15 percent, hurt partly by higher operating expenses as the developer of telecom networks technology shifted focus to high-margin wireless fiber-optic systems, sending its shares down 20 percent in extended trade.

In the second quarter, the company increased sales and marketing efforts to secure higher-margin wireless fiber optic distribution system (WFDS) projects and installations. Revenue from WFDS installations accounted for about 21 percent of revenue in the first half of the year.

Telestone reported second-quarter net income of $1.7 million, or 16 cents a share, compared with $2.0 million, or 19 cents a share, in the previous year.

Revenue rose 37 percent to $16.6 million. Operating expenses more than doubled to $5.3 million.

In the first half of the year, China Mobile (0941.HK) accounted for 63.4 percent of Telestone's revenue, China Unicom (0762.HK) 21 percent and China Telecom (0728.HK) 13.3 percent.

Telestone reaffirmed its 2010 outlook for profit of $22.9 million on revenue of $129.4 million.

Shares of the company, which have gained about 44 percent in the last one month, tumbled to $10.85 in trading after the bell. They closed at $13.59 Thursday on Nasdaq. (Reporting by Tenzin Dekeva in Bangalore; Editing by Unnikrishnan Nair)